Standing Committee D

[Mr. Alan Hurst in the Chair]

Commonhold and Leasehold Reform Bill [Lords]

Clause 24 - Definition

William Cash: I beg to move amendment No. 41, in page 11, line 36, leave out from 'means' to end of line 38 and insert
'all structural parts of the commonhold and those areas used in common''.'.

Alan Hurst: With this it will convenient to take amendment No. 42, in page 11, line 38, at end insert-
'( ) The structure shall include- 
 (a) main walls (but not the internal plaster surfaces thereof), 
 (b) floors (but not the timber or other surfaces thereof or plaster or other surfaces to any ceiling below), 
 (c) roof, 
 (d) roads, paths and pavements, and 
 (e) such other areas not forming part of the commonhold unit.'.

William Cash: Basically, it is highly desirable, if not essential, for all of the structure of common areas to be maintained and insured by the commonhold association. The existing provisions make the residual parts of the structure, which are not maintained or insured by the unit owner, the responsibility of the commonhold association. We believe that that would put too much responsibility on the unit owners to the risk of the community as a whole. It seems essential that the commonhold association should have the power and responsibility to ensure the integrity of the building, even after a fire. If a number of units are badly damaged, the reinstatement of the building could be damaged if an individual unit owner had not properly insured the unit that he happened to own. A similar problem could quite well arise in the cases of serious disrepair.
 The upshot of this is that the unit owner's responsibilities should not go beyond his own unit and should be limited to those matters that affect only his unit: for example, the wall and ceiling plaster, the floorboards and internal partitions, but no structural or party walls and window frames. Giving responsibility to the commonhold association for any part that is not the responsibility of the unit owner limits its role if the unit owner's responsibilities are wider than is regarded as being appropriate. The commonhold association should have a specific, minimum level of responsibility with the unit owner responsible only for elements of the building that affect his unit alone.

Michael Wills: I sympathise with the hon. Gentleman's desire for clarity in these matters. Unfortunately, I do not think that the
 amendments will achieve that. They attempt to define all structural parts of a commonhold as common parts, and then define what is meant by the term structure in that context. On further reflection, the hon. Gentleman will find that it makes no sense at all to define all structural parts as common parts and thus make them the responsibility of the commonhold association. Why should the commonhold association be responsible for the structure of a detached house in a development? Why should the association maintain and insure it?
 We agree that there will be occasions, such as the obvious example of a block of flats, when it will be appropriate for the association to take responsibility for much of the structure, but this is surely not the way to achieve that. Our definition, which makes common parts of everything within the commonhold that is not defined as a unit, achieves the proper end. The question of what is and is not structural for the purposes of insurance and maintenance of blocks of flats will be a matter for the developer to define in the first instance. Of course, if it turns out in the light of experience in a particular commonhold that those definitions do not work, the commonhold association, which after all comprises individual unit-holders, can amend the commonhold community statement to overcome the problem. 
 Having given the hon. Member for Stone (Mr. Cash) that explanation, I hope that he will withdraw the amendment.

William Cash: In the light of the Minister's remarks, I do not see any need to develop the argument that I already made, and I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 24 ordered to stand part of the Bill. 
 Clauses 25 to 29 ordered to stand part of the Bill.

Clause 30 - Form and content: general

Adrian Sanders: I beg to move amendment No. 3, in page 14, line 14, at end insert:
'(6A) Provision in a commonhold community statement imposing a duty to pay money (whether in pursuance of subsection (5)(a) or any other provision made by or by virtue of this part) may include provision as to the payment of outstanding service charges on the sale or transfer of any commonhold unit.'

Alan Hurst: With this it will be convenient to take the following amendments: No. 47, in page 14, line 17, leave out 'not'.
 No. 24, in clause 36, page 17, line 23, at end insert: 
'and (c) provision for monies payable by a unit-holder to the commonhold association under sub-sections (1) and (2) hereof and under provisions made under section 37(1) hereof to be a charge over that unit-holder's unit and enforceable as a first legal charge in priority to all other charges or encumbrances over that unit-holder's unit.'

Adrian Sanders: Clause 30 is part of the key document on the commonhold community statement. Its aim is to describe the physical attributes of the development and contain the rules and regulations by which the commonhold would be conducted. An important part of those rules will be the association's ability to collect
 the debts that are owed to it. The amendment would deal with the potentially serious problems that can arise from the non-payment of charges or the late payment of charges or contributions to the commonhold association.
 The problem is that persistent non-payers or late payers may impose serious hardships on the other members of the commonhold association. For example, the commonhold association may be unable to carry out maintenance or to pay people who have delivered services to the association. It may fall to other members of the commonhold association to pay more. The difference between a commonhold association and the current landlord-tenant relationship is that the landlord can use the threat of forfeiture, something that is not available to a commonhold association. In practice, forfeiture is rarely enforced because the landlord has to serve a notice calling for defects to be remedied and provide time for compliance under section 146 of the Law of Property Act 1925. Where the failure relates to payment of rent, similar provisions apply to enable a tenant to obtain relief, but only on payment of what is due-a powerful and effective weapon. Such a weapon can be too effective in the hands of aggressive landlords and can be used too soon or too frequently, and that can be a serious concern for tenants faced with inappropriate use of forfeiture proceedings. 
 Any equivalent for a commonhold association is far less likely because the association is also made up of the various members, who know that any threat against a recalcitrant-[Interruption.] I search my thesaurus for an easier word to pronounce-a poor or badly behaved member of the association can also be used against them. Abuse of power equivalent to forfeiture is a remote danger for a commonhold association. Without the threat of forfeiture or its equivalent, it is far more difficult to enforce timely payment of the necessary contributions. 
 It cannot be right that non-payers or late payers should be able to force other members who abide by the association's rules to increase their payments because of the non-receipt of debt. A commonhold association can make a claim against a unit holder for non-payment, secure a judgment and, in due course, ask the court for a charging order, but it is a slow and expensive procedure that gives the charges due to the commonhold association no priority over other charges. I support the amendment proposed by the hon. Member for Stone, which tackles the issue of priority over debt repayment.

William Cash: Hon. Members who were present on Second Reading may recall the widely expressed-not only on the Conservative side-view that the commonhold association should have an effective sanction for the recovery of debts from unit-holders and that ordinary procedures for recovery, particularly charging orders, were inadequate. That is an important general comment.
 The substantive amendment is designed to deal with enforcement. If a unit-holder owes money to the 
 commonhold association, how can the association require the unit-holder to pay up? The amendment is designed to make the provisions more workable. The commonhold association will succeed only if unit-holders honour their obligations. Every penny that one unit-holder escapes paying is a penny that other unit-holders in the block will have to pay. An effective and cheap means of enforcement is therefore essential to the success of commonhold. 
 As I said on Second Reading, the Government's proposals are ineffective-an accusation frequently made by the Government about the Opposition's proposals, so we can trade this one off. The Government anticipate the commonhold association taking ordinary proceedings for debt. Ordinary money judgments are typically arrived at by obtaining a charging order over the commonhold unit, but that method of enforcement works only if there is equity in the commonhold unit. If a heavily indebted unit-holder defaults-as will often be the case-there may be no equity in the property. In leasehold property, this problem is avoided because the landlord has a power of forfeiture which takes priority over any mortgage that the lessee may have granted. The practical effect is that the first mortgagee invariably pays off the arrears owed to the landlord so that the mortgagee does not lose his security. 
 Amendment No. 34 proposes a variation. Any moneys owing will, as with a leasehold, be a first charge on the unit and take priority over any mortgage. If a unit-holder defaults, the commonhold association will apply for possession and order a sale. At that stage it is likely that the mortgagee will intervene and pay off the arrears. If not, then the commonhold association will be able to sell the unit to recover the arrears of service charge. This is a fair recognition of the interests of other unit-holders in the block. If they do not have a powerful way of enforcing service charge demands, law-abiding unit-holders will be subsidising default unit-holders.

John Taylor: A slight problem occurs to me. I clearly follow my hon. Friend's arguments on the priority between a mortgage and indebtedness to the association. I have a serious question, to which the Minister might turn his mind this afternoon or, if I have taken him by surprise, on which he may like to reflect , then and write to you, Mr. Chairman, with copies sent to other Members of the Committee.
 The question was first identified and developed by Lord Denning. We can make a judgment on the priority between the mortgage on the one hand and the indebtedness to the commonhold association on the other, but where in this range of priorities is the deserted spouse? The Minister may know that Lord Denning came to the rescue of a deserted spouse in priority over a first mortgagee. That led to the development of the class F land charge. 
 I do not require this question to be resolved this afternoon, but the problem of the deserted wife is important. I suppose the question would apply equally to a deserted husband, but in my experience as a practitioner it is more often a deserted wife, probably 
 with children and unable to meet the mortgage. Was she to be put out into the street? ''No'', said Lord Denning. He altered the priorities and said that the rights of the deserted spouse were superior to those of the building society. Many people would say that that was a humane judgment. Now that there are three conflicting priorities, the Minister might want to answer the question-we are still in Committee and under a timetable-before the Bill progresses too far. I shall not think him churlish if he would like to reserve his position and let us all have a note about the matter.

Michael Wills: First I will deal with amendment No. 3, which, as drafted, I found puzzling. I presume that it is intended that outstanding assessment should be collectable on sale or transfer only of a unit to which the arrears apply. As drafted it would be possible to apply for payment of arrears on unit A on the sale of unit B, the sale of which had no connection whatever with A.
 In any event, we would not want to see this extra level of regulation in the Bill. Under present law, there are many ways in which a commonhold association can proceed against a debtor. Every extra means added to the Bill that serves to make commonhold ownership potentially more onerous than regular freehold ownership will inevitably serve also to make it less attractive as a form of tenure. 
 Amendment No. 47 would lift the ban on the commonhold community statement providing 
''for the transfer or loss of an interest in land on the occurrence or non-occurrence of a specified event.''
 The purpose of the ban is to ensure that a commonhold cannot be set up in circumstances in which it might be deprived of some or all of its land other than with the agreement of the members of the commonhold association. Paragraph 3 of schedule 2 imposes embargoes on certain types of land becoming commonhold because the title to the land is liable to change hands in future circumstances beyond the control of the commonhold association. 
 It appears from explanations given in another place that the amendment is not directed at the issue of ''contingent title'', but is designed to allow the commonhold community statement to say that a form of forfeiture applies in commonhold. Under the amendment, the statement could specify that the unit holder's interest could be transferred or lost if payment of assessments were not made. We have said that we are implacably opposed to the introduction of anything even mildly resembling forfeiture in the Bill, and I trust that we can hold that line. 
 The amendment takes a long-stop approach to debt recovery. We believe that the commonhold association will need to recover money owed quickly and efficiently, and we resist what is suggested under the amendment. We recognise that it is permissive but, nonetheless, we believe that it permits something undesirable. 
 Amendment No. 24 would regulate commonholds in a way that freeholds are not regulated. We recognise that defaulting commonhold unit-holders will be serious nuisances to the association and to other unit-holders, but we still believe that the provisions 
 already available, such as the small claims court, are sufficient for the purpose. Despite the extent of the regulation inherent in the Bill, we are keen to avoid introducing special provisions that remove commonhold from the freehold ideal to which commonhold unit-holders will aspire. The more onerous the special provisions, the less popular commonhold is likely to be. 
 I bow to the erudition of the hon. Member for Solihull (Mr. Taylor) on the subject of Lord Denning's judgments. We do not intend to accept the priority suggested by the hon. Member for Stone, so the question of the deserted spouse does not arise. However, I will consider the point carefully, and am happy to write to the hon. Member for Solihull with more details. I hope that I have dealt adequately with his intervention. I also hope that the hon. Members for Stone and for Torbay (Mr. Sanders) feel able to withdraw their amendments.

William Cash: I will let the hon. Member for Torbay speak first.

Adrian Sanders: That is gracious of the hon. Gentleman.
 I shall withdraw the amendment, but I am concerned that there could be cash flow difficulties as a consequence. We must wait and see.

William Cash: I endorse that view. I was a little surprised, because the Minister is usually diligent and thorough-

Julian Lewis: Except about regulations.

William Cash: Yes. The Minister has glossed over the practical difficulties that arise when a unit-holder defaults. It is not good enough for him to say that he is implacably opposed to forfeiture. He has not come up with a solution to what any reasonable person would regard as a thoroughly practical difficulty. The amendment is important because the issue of a defaulting unit-holder who leaves a spouse in difficulties, or leads to the other commonholders being severely prejudiced, requires more attention than the Minister seems prepared to give.
 I wondered whether the Minister did not want to get into the argument because he thought that the arguments that he was advancing did not stand up well, which is sometimes a useful dodge. Perhaps he was unpersuaded by the arguments that were given to him to use and he supposed that he might get away with just saying, ''Well, we're opposed. We've got a majority on the Committee and that's that.'' However, that is not good enough. 
 I am without prejudice on the question of returning to the matter on Report. There are two or three important issues that we may want to probe at that stage, when we may hear a more lucid and fuller explanation from the Minister-[Interruption]-subject to his being about to burst forth now.

Michael Wills: As the hon. Gentleman is anxious about my state of mind, I thought that I should reassure him that I am wholly persuaded by the arguments that I have made. There is a battery of measures to deal with the problem. I assure him and the hon. Member for
 Torbay that we take the matter seriously and can see the problems that might arise. The reason why we are implacably opposed to forfeiture was graphically explained by many of my hon. Friends on Second Reading. We do not want the provision in the Bill, which does not mean that we take the matter raised by both hon. Gentlemen lightly. We realise that it is serious, but we believe that adequate measures are already in place. I hope that that reassures them.

William Cash: I have to say that I am not reassured, although not because I want to be difficult. There may be other systems that can be employed for the recovery of debt, but one essential ingredient in the package is consistent forms of community statements. There will be a company limited by guarantee, with a commonhold association with common-form regulations that will all apply to the same people. We do not want to find that, in practice, there is something in other legislation that can be drawn on and that can in any way vitiate this legislation's coherence. I do not intend to repeat what I have said, but I am not satisfied with the Minister's comments. I reserve the position, but I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 30 ordered to stand part of the Bill.

Clause 31 - Regulations

Amendment made: No. 17, in page 15, line 3, after '20,' insert '[Part-unit: interests],'.-[Mr. Wills.] 
 Clause 31, as amended, ordered to stand part of the Bill. 
 Clause 32 ordered to stand part of the Bill.

Clause 33 - Constitution

Adrian Sanders: I beg to move amendment No. 4, in page 15, line 34, after '(1)', insert
'Subject to subsection (3) below,'.

Alan Hurst: With this it will be convenient to take amendment No. 5, in page 15, line 42, at end insert-
'(3) Regulations may make provision for the establishment of a commonhold partnership with limited liability in respect of any commonhold association with ten members or fewer.'.

Adrian Sanders: It will not take long to deal with the amendment, which raises the question whether the right structure for commonhold associations has been chosen. Instead of placing them under the new incorporation of companies, some might find that a different arrangement is more beneficial.
 The Government propose a company that is limited by guarantee. The objection raised was that that is a formal and complicated structure. We want commonhold to work and we want people to take it up. We want to encourage developers to put together projects based on the concept of commonhold. 
 However, more small groups of people might move to commonhold and the more that they consider the regulations, the more complicated and difficult those regulations may become. It is asking rather much of a group of, say, 10 or fewer people to expect them to manage a company that is limited by guarantee. Obviously, a corporate structure for commonhold association is necessary, but our view is that that structure and administration could be carried out under the Limited Liability Partnerships Act 2000. That would be a good deal simpler and less off-putting to those who wish to form a commonhold association. 
 Limited liability partnerships are a novel form of incorporation and it may be premature to suggest that they are an alternative that is currently available. I am uncertain about that, and no doubt the Minister will respond. However, at the least, the Bill should include powers allowing limited liability partnerships to be in introduced in future if they are likely to be beneficial to small commonhold associations. 
 The Minister may not agree that there are disincentives for small commonhold associations, but how does he think that a small group of people who had chosen that option would get around regulations that may appear burdensome and off-putting?

John Taylor: That is an interesting idea and I am quite attracted by it. It had not occurred to me. What occurred to me was something rather different, which could be raised in deliberations on the constitution of commonhold associations. I will leave my mind open as to whether it should be a company limited by guarantee or a limited liability partnership, or whether both options might be available.
 Under the current provisions, the commencement working capital of a company limited by guarantee would-if there were 100 members-be £100. That is not very much. In my experience-as we get older, experience is sometimes the only thing that we can claim in aid in an argument-organisations such as commonhold associations should set sinking fund targets from the outset. In that way they can, over time, put themselves comfortably into credit and build up balances that might be hypothecated. A balance may one day be needed to repair the roof. Members of the association may wonder, ''What if the lift breaks down? Do we have the money to employ engineers to repair it because it is a problem for the ladies on the top floor?'' 
 While the setting of sinking fund targets need not be included in the powers under the Bill, it should be clearly stated in good practice publications that people forming commonhold associations would need to build up balances. Those funds will not solve the problem of an intransigent person who will not pay. That remains a problem. However, it is slightly easier to cope with the intransigent person who will not pay if one is also sitting on a balance of £40,000-one has more flexibility in how one deals with him. Will the Minister show his openness of mind to my suggestion? No doubt when the first few pioneers embark on their commonholds, they will turn around and say, ''How do we do this? Are there any instruction manuals? Has anyone gone down this road already? What lessons have been learnt so far? What are the mistakes that we 
 can avoid repeating?'' If the Government are to encourage such manuals, as they should, one recommendation should be to start building up sinking funds from the beginning. There will be a rainy day-somebody will find that windows have not been fitted properly, the roof needs repair, the plumbing has gone wrong, or, worse still, the foul drainage has gone wrong. It is a great comfort to know that, despite such an awful problem, at least there is £40,000 in the bank.

Michael Wills: I have considerable sympathy with the motives underlying the amendments. I accept that they are designed to make sure that commonhold works effectively. Unfortunately, as the hon. Member for Torbay has guessed, we shall have to resist them.
 Amendment No. 4 would pave the way for a provision that would allow for the use of limited liability partnerships as an alternative corporate structure. Such an arrangement is not suitable for the purpose, and we shall resist the amendment. 
 Amendment No. 5 is based on a misapprehension. Several leaseholder groups and others have been active, in advance of the various stages of the Bill, in suggesting that the company structure is too onerous for small commonholds, and that the end result could be a disaster. First, we do not believe that that is the case. The rules that relate especially to small business are not difficulty to apply, and, for all the reasons outlined by the hon. Member for Solihull, we expect to have prepared good-quality, clear instructions for those who will run commonholds. 
 The limited liability partnership structure was designed for a completely different set of circumstances, and is inappropriate for this purpose. First, it is defined, in its own legislation, as being specifically designed for partnerships that trade for profit. The great majority of commonhold associations will not trade. Secondly, membership of a limited liability partnership is a matter for the partners. Who may join the partnership, who leaves, and on what terms, are matters for the partners. In commonhold, membership of the association is tied strictly to ownership of a unit, and the purchase and sale of that unit defines membership. That is absolutely crucial to the concept of commonhold. Private companies limited by guarantee are generally membership-type organisations that do not trade for profit. That is the profile of the commonhold association, and that is the corporate structure with which we intend to press ahead. 
 I hope that I have been able to persuade the hon. Member for Torbay that we are addressing his concerns, even though we are resisting his amendments. In the light of that, I hope that he will withdraw the amendment.

John Taylor: I have one other thought that the Minister might consider. Once again, I do not necessarily seek an answer this afternoon.
 While the Minister was addressing this question, he rather won me over, and I am more and more satisfied that the company limited by guarantee is the right structure. However, if commonhold associations do not build up the balances that I was commending a 
 moment ago-in some cases, they will not-what is the potential for a company limited by guarantee to borrow from conventional lending sources? If I were a banker and somebody came along to me with a company limited by guarantee with 100 shares of £1 each, I would say, ''What is your collateral? Where is my security?'' 
 I was brought up on leaseholds and freeholds, and I am finding commonhold difficult to get my mind round. I do not know whether the commonhold association will own any assets. If I were a banker, I would be comforted if it owned some assets. 
 The Minister may require inspiration. I can deal with that in two ways. I could tell him that a reply tomorrow will do, or I can continue to talk, like on ''Just a Minute'', until we reach a point at which the Minister is inspired to give an answer. 
 It is clear what happens in the case of leaseholds. I am dealing with such a situation in my constituency, and I have declared that interest. I own a 125-year lease on an apartment-as it is grandly called; let us call it a flat-as do 12 other people. We are 13 people, which is an awkward number. 
 When the Bill is enacted, we will be able, by majority-to distinguish this from the commonhold situation-to go to the ground landlord and say, ''Let us buy the freehold for X pounds.'' At that point, our corporate entity, or company limited by guarantee, would have an extremely important asset. It would own the freehold and the right to collect 13 ground rents. The banker would then be in business. He could say, ''Ah, I see that you have something solid there: a freehold title deed. I think that I can lend you money on the security of that.'' That happens if a bunch of leaseholders who act in concert can get hold of a freehold to be owned by their limited liability company. Under their instruction, the company may go to a banker and ask for money. I am not sure whether a commonhold association and its company will have an asset that could be useful.

Michael Wills: The hon. Gentleman is right to assume that the commonhold association would be able to borrow on the basis of the common parts or the income stream, but not the individual units that are owned on a freehold by the unit-holder.
 The hon. Gentleman was right to draw attention to the need for a sinking fund to cover the awful eventualities that he described. Clauses 37 and 38 cover that, and there will be guidance on the matter in the best practice guides that we intend to publish. In the light of our interesting and useful debate, I hope that the hon. Member for Torbay will withdraw the amendment.

William Cash: The debate prompted a number of thoughts while I looked through the draft memorandum and articles of association. The provisions of clause 33 are very short. I have dealt with many-although I do not know how many-private companies limited by guarantee during my years in practice. The clause contains pretty normal stuff.
 The problem with the clause is that it will take time for people to adjust to the mechanics of the new concept of commonhold. A company limited by guarantee will not be lifted off a shelf with an indication of the way in which it is expected to work. Practically, and in conjunction with the commonhold community statement, the clause proposes the regulation of the relationship among all the parties under the memorandum and articles of association. That leads us to the delicate areas that we have addressed in part today, such as default, remedy, and who enforces the regulation and how. It does not behove me to mention yet again the fact that it would have been helpful to have the draft provisions earlier; I do not want to make an issue of that now. 
 An important question is involved that relates to the Report stage. We received a helpful explanatory memorandum on the Bill. Examining the guts of the Bill shows that the memorandum and articles of association will govern the regulatory arrangements between the different members. Some provisions deal with the appointment and removal of directors, which might make people wonder how that will operate in practice. 
 A director need not be a member of the commonhold association. A significant number of provisions relate to the role of the developer, who has special functions, powers and rights to be calibrated with the unit-holders. 
 The Minister may confirm my assumption that the intention is that people will adopt the proposal as the common form; it is not merely a question of whether people like the proposal. If some of it does not work, a power is provided under the regulations to make adjustments through regulations-a Henry VIII clause. 
 Let us examine the practicalities of how the provision may work. Article 44 of the memorandum from the association states: 
''This article shall apply if the Commonhold Community Statement''
 -the document that I have here- 
''confers upon the developer the right to appoint and remove directors of the Commonhold Association.''
 Labour Members may wonder exactly what the developer's range of responsibilities, rights and powers will be in that context. Rather than go through the entire constitution, which it would be invidious for me to do now, given what I have already said about timing, it would be helpful to consider whether we could arrive at a mechanism to enable, if it turns out to be necessary, amendments to that common form, which is an important part of the Bill and is subject only to the making of amending regulations later. I hope that I am making myself clear. We are considering draft proposals that, when the regulations are made, will become the manner in which all commonhold associations operate. The proposal is, therefore, just as important as the 
 ingredients of the Bill itself, because it will regulate the relationship between all the parties. 
 I invite the Committee to consider whether, in the interests of people who will be affected by the Bill, we should consider on Report circumstances in which practical or difficult technical or legal questions arise that give us reason to believe that we should amend or make proposals-this is only a draft-in order to ensure that everything fits properly and makes sense in relation to the proposals in the Bill. 
 A danger is involved in dealing with the guts of a Bill through regulations. We all know that regulations go through like a dose of salts. No one ever bothers to read them. In many cases, there may be some justification for the speedy manner in which they are dealt with. However, the proposal will affect the relationships between all the parties involved. 
 The Committee wishes the Bill to work effectively. Given that we have had to consider the matter under discussion without the benefit of outside advice, it behoves all of us to think carefully about its implications, and to hold our position open, so that we can return to it on Report, when-as we have to address the scope of the Bill-we could come forward with amendments that would, in effect, say, ''In respect of the regulations that are empowered to be made under the Bill, the following provisions shall or shall not be allowed.'' They would be amendments to clauses 31 and 32, but they would be specific about what may and may not be included. 
 That is a reasonable attitude to adopt, in the light of what I have said. I look forward to the Minister's response because I know that he is a transparent fellow who has an open mind, and that he wants the Bill to work. Therefore, I am sure that he would not want anything to be included in these regulations-and in the constitution that flows from them under schedule 3-that would prevent them from working satisfactorily.

Michael Wills: The hon. Gentleman is right to say that we want the Bill to work well, and he is right to scrutinise everything. However, when he has found the time to examine the matter more carefully, he will discover that his worries are more abstract and theoretical than they are real.

William Cash: You mean legal.

Michael Wills: No, I do not.
 The regulations are, primarily, technical. They do not go to the heart of the Bill. Its heart lies in the matters that have already been discussed; they were exhaustively rehearsed on Second Reading, and in another place. 
 The options that the hon. Gentleman has described remain open to him. I would not encourage him to pursue them too far, but it is up to him to make a decision about that. However, it is my fond belief that he will gain reassurance as the Committee works through the rest of the Bill. 
 For the third time, I invite the hon. Member for Torbay to withdraw his amendment.

Adrian Sanders: I am not reassured by the Minister's comments.
 A small commonhold association of fewer than 10 people might consider embarking upon the process under discussion. I am a non-pecuniary director of a not-for-profit limited liability company that is in the charitable sector. Therefore, I have direct experience of the amount of responsibility that rests on the shoulders of such directors. I am also aware of the amount of work and effort that has to be put in by the person who acts as the company secretary-the person who is the holder of the funds. 
 Such people have to make a considerable commitment, and that has implications for any group of people who might wish to seek to share in the ownership of their property by forming a commonhold association. Some of those people might be working, others may be retired, but all of them will have to put in a significant amount of time and energy; they will have to keep abreast of changes to the laws of the land and to the guidelines for limited liability companies. 
 Therefore, I wonder whether the arrangement under discussion would be right for a small group of people. I fear that, on the contrary, it might defeat the object. I suspect that only large groups of, for instance, 50 or 60-plus unit-holders would choose to form commonhold associations, because the laws of dynamics suggest that in such circumstances there might be enough people for some of them to be willing to come forward and take on the necessary roles and responsibilities. Groups of fewer than 10 people might often feel that creating a commonhold association requires too much effort. 
 I shall withdraw the amendment, but we may need to come back to the issue on Report. I would be interested to hear why the Minister does not share my fears. Why does he think that people will find it easy to come to grips with such important responsibilities? My experience is that it be asking an enormous effort of a few people within the unit-holders group. I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Clause 33 ordered to stand part of the Bill. 
 Schedule 3 agreed to. 
 Clause 34 ordered to stand part of the Bill.

Clause 35 - Voting

Question proposed, That the clause stand part of the Bill.

John Taylor: I will delay the Committee only briefly to engage in a little retrospection. I have more than 20 years' experience of partnerships and comparable experience of limited liability companies, including a company limited by guarantee. I would rather live within a constitutional structure that is a company limited by guarantee than a partnership. Partnerships have all the characteristics of an unhappy marriage without any of the benefits. I have had enough of
 partnerships and would steer clear of them. I would not recommend them to anyone.
 Question put and agreed to. 
 Clause 35 ordered to stand part of the Bill. 
 Clauses 36 and 37 ordered to stand part of the Bill.

Clause 38 - Reserve fund

William Cash: I beg to move amendment No. 49, in page 18, line 27, at end insert-
'(3A) The assets of a fund established and maintained by virtue of this section shall be treated as monies reserved for future expenditure. 
 (3B) Any sums paid into a fund established and maintained by virtue of this section by a unit-holder, and any investments representing those sums, shall (together with any income accruing thereon) be held by the commonhold association on trust either as a single fund, or, if the commonhold association deems appropriate, as two or more separate funds. 
 (3C) The commonhold association shall hold any trust fund- 
 (a) on trust to defray costs incurred in connection with the matters for which the relevant contributions were payable (whether incurred by the commonhold association itself or by another person), and 
 (b) subject to that, on trust for the persons who are the contributing unit-holders for the time-being. 
 (3D) Subject to subsections (3F) and (3G), the contributing unit-holders shall be treated as entitled by virtue of subsection (3C)(b) to such shares in the residue of any such fund as are proportionate to their respective liabilities to pay a proportion of the levy set under subsection (2). 
 (3E) If the Secretary of State by order so provides, any sums standing to the credit of any trust fund may, instead of being invested in any other manner authorised by law, be invested in such manner as may be specified in the order; and any such order may contain such incidental, supplemental or transitional provisions as the Secretary of State considers appropriate in connection with the order. 
 (3F) On the transfer of a commonhold unit, the unit-holder shall not be entitled to any part of any trust fund, and any part of such trust fund which is attributable to relevant contributions paid in accordance with this section shall accordingly continue to be held on the trusts referred to in subsection (3C). 
 (3G) Any trust fund established under this section shall be exempt from any tax in respect of contributions made to it by the unit holders, whether (apart from this provision) a liability to tax may be imposed on the commonhold association or the contributing unit-holder.'.
 The measure relates to the mechanics of the reserve fund and provides that: 
''Regulations under section 31 may, in particular, require a commonhold community statement to make provision-
(a) requiring the directors of the commonhold association to establish and maintain one or more funds''
 I refer again to the common form memorandum of association, which includes provisions relating to the matter and which raises again the question of its interaction with the mechanics of the commonhold association. 
 The amendment would provide for the creation of a reserve fund. It would also provide that sums invested under these provisions would be held by the commonhold association as a single fund or two or more separate funds. 
 We need to be sure that nothing in the amendment would conflict with the arrangements of the commonhold association. However, we would not be happy if it turned out that the form of association imposed on unit-holders did not permit the creation of the sort of reserve fund that we propose. 
 The provisions in new subsection (3C), paragraphs (a) and (b) make eminent sense. New subsection (3D) provides that the contributing unit-holders would be required to be 
''treated as entitled . . . to such shares in the residue of any such fund as are proportionate to their respective liabilities to pay a proportion of the levy set under subsection (2)'',
 which is also eminently sensible. 
 We acknowledge that the Secretary of State has an important role in all this. The amendment states: 
''(3E) The Secretary of State by order so provides, any sums standing to the credit of any trust fund may, instead of being invested in any other manner authorised by law, be invested in such manner as may be specified in the order;''
 Of course, the provisions of the common form for the commonhold association are also relevant in this context. 
 The amendment continues: 
''(3F) On the transfer of a commonhold unit, the unit-holder shall not be entitled to any part of any trust fund, and any part of such trust fund which is attributable to relevant contributions paid in accordance with this section shall accordingly continue to be held on the trusts referred to in subsection (3C).''
 All those ideas, observations and suggestions are, I hope, understandable and acceptable to anyone who has regard for the importance of providing that the reserve fund operates in a proper manner. One must remember that 
''Any trust fund established under this section shall be exempt from any tax in respect of contributions made to it by the unit holders, whether (apart from this provision) a liability to tax may be imposed on the commonhold association or the contributing unit-holder.''
 Clause 38, which deals with the reserve fund, states that ''regulations under section 31'', which is the power to make regulations, to which we return frequently, 
''may, in particular, require a commonhold community statement'',
 -the memorandum of association, many copies of which are on the Table- 
''requiring the directors of the commonhold association to establish . . . one or more funds to finance the repair and maintenance of the common parts''
 and commonhold units. I will not go into all the provisions to make my point, but will simply say that it is important that the proposed reserve fund should be dealt with in a manner that pays due regard to the apportionment of the ownership and the beneficial interest of the unit-holders in the way that I described. The establishment of such trust funds is appropriate first to ensure that the unit-holders are properly protected in the event that the association becomes insolvent and, secondly and importantly, to prevent a misuse of funds. 
 The Government have made suggestions in the other place, but we believe that those considerations apply to commonholds that may become insolvent. One example might be a substantial liability for a factor such as nuisance or trespass, which was uninsured. An example of nuisance would be liability for tree roots, which one can find in some London streets where a tree is immediately adjacent to a block of flats. I have had practical experience of that, and the case went on for four or five years. Not only did it go on for years, but getting the local authority to accept liability for the tree and its roots also touched on the liability of the surveyors and the laws on negligence and insurance. The whole case became a nightmare and it involved only one flat owner. 
 In the context of the Bill, more serious problems could arise. The creation of funds that are clearly distinguishable from those in the hands of property owners is extremely important. Unit-holders would not build up a large sinking fund if they thought it could be cut by expenditure on day-to-day expenses. Those points are dealt with under new subsection (3B). 
 Subsection (3F) would make the transfer of commonhold easier to achieve and would avoid commonhold associations having to collect money repeatedly when units were sold. Subsection (3G) would reduce the burden of administration and the costs of the commonhold and remove what might otherwise be regarded as a disincentive to sinking funds. 
 We must remember that the practical and technical questions that we refer to are not driven only by a requirement to achieve a solution. We have to be practical about how the operations work in practice. The arrangements that I mentioned ought to be introduced, but I am interested to hear what the Minister has to say.

Michael Wills: As the hon. Gentleman will be aware, the amendment would introduce into commonholding a form of fundholding that was developed for leasehold funds by section 42 of the Landlord and Tenant Act 1987. The purpose of section 42 was to establish the rule that funds for future works held by the landlord or his agent should be held in trust for the lessees. That was introduced to improve and standardise the manner in which service charges and sinking funds were managed while they remained in the hands of the landlord. The statutory trust fund for leasehold service charges in section 42 has two clear benefits. Money paid by tenants to the payee of the fine in subsection 42(1) will be safe from creditors in the event of the payee's bankruptcy or liquidation. That is especially important because, in the majority of cases, the payee will be the landlord. It is evident that any wrongdoing or mismanagement of funds by him or her should not result in financial hardship to tenants. Secondly, section 42 ensures that the payee is subject to the duties of trustees and will therefore be liable for breach of trust if the money is misappropriated and not adequately safeguarded or invested. The trust set-up also enables the tracing of service charge funds under the arrangements for trust funds.
 Such considerations do not apply within commonhold. The commonhold association is a company whose members are those who paid the money into the funds. They appoint and dismiss the directors of the company; they approve the objects of expenditure and the setting of budgets, and have absolute control over all aspects of the company under company law. The directors who act on their behalf are bound by their fiduciary duty to act honestly and bona fide in the interests of the company and are also subject to the sanctions available under both the Companies Acts and the general criminal law. They must produce accounts and answer for their contents. Commonhold association funds are funds of the company, not of the directors. Clearly, the purposes for which section 42 was included in the 1987 Act do not apply in commonhold. It is not necessary for the directors of the commonhold association to be placed under trustee duties in relation to reserve fund moneys. I hope that my explanation will reassure the hon. Gentleman and that he will now withdraw the amendment.

William Cash: I am not persuaded by the Minister's argument. That there happen to be distinguishing features between the provisions of the Law of Property Act 1925 to which the hon. Gentleman referred and the Bill does not alter the fact that there could be breaches of trust, malfeasance and breaches by virtue of default. It seems extraordinary that there is resistance to requiring arrangements that would effectively protect the very people whom we are seeking to protect.
 I refer the Committee to the commonhold community statement. For example, article 48 provides for indemnities and states: 
''Without prejudice to any other remedy to which the Commonhold Association or any other Unit-holder may be entitled, any Unit-holder who is in breach of any provision of the Articles or the Rules or any statutory requirement (the 'defaulter') shall indemnify and hold harmless the Commonhold Association and any other Unit-holder against any costs arising from such breach, including, if appropriate, the costs of remedying the breach''.
 Each time we consider whether there may be default or a disturbance in the relationship between the parties, we are driven back to the common form that provides, in theory, for such eventualities. In that particular, instance, it would be far more appropriate for proper provision to be made to protect the interests of those involved under the terms that I have described in my amendment. It is clear that the Minister is not interested in adopting such proposals. I believe that his answer was somewhat misconceived. However, if necessary, I am sure that we can consider such matters at another stage in our proceedings. I shall not press the amendment to a Division, but the hon. Gentleman's argument was not adequate and I reserve my position until we discuss the Bill on Report. I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Clause 38 ordered to stand part of the Bill. 
 Clauses 39 to 41 ordered to stand part of the Bill.

Clause 42 - Winding-up resolution

Sue Doughty: I beg to move amendment No. 6, in page 21, line 9, at end insert
'in person, by secret ballot'.
 This is a small amendment. It would be desirable for voting on this important matter to take place in secret so that people were not left open to all sorts of pressure, which would be wrong.

Michael Wills: I cannot be quite as brief as the hon. Lady. She raised an important point, but we shall resist the amendment because insisting that a vote on a winding-up resolution be cast in person would exclude the possibility of proxy and postal voting.
 What reasons might outweigh the right of a member of the commonhold association to vote on a matter of such importance? What principles should override that right? Such a vote will be one of the most important in the life of a commonhold association, although it is to be hoped that the vast majority will exist quite happily without ever having to consider one. Why should a member who is unable to attend not be entitled to a proxy vote if they have sufficient faith in a friend or neighbour to listen to the arguments and vote accordingly? They should not be disenfranchised or, where they do not have a trusted friend, deprived of a postal vote. 
 Having said that, the voting process is a matter for the memorandum and articles of association, which already contain items on voting regulations. Provision is not currently made for specific ballots, but I am happy to reassure the hon. Lady that we shall consider how to deal with the issue and include it in our next round of consultation because we recognise its importance. I hope, therefore, that she can accept that reassurance and withdraw the amendment.

Sue Doughty: I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 42 ordered to stand part of the Bill.

Graham Stringer: On a point of order, Mr. Hurst. For the sake of your voice and in the interests of the Committee, may I suggest that we take schedule 4 and the 23 clauses up to clause 66 together, if there is no objection?

Alan Hurst: Subject to the Committee's agreement, I intend to take all the provisions up to clause 58 together and to take those thereafter individually because there will be amendments.
 Clauses 43 to 57 ordered to stand part of the Bill. 
 Schedule 4 agreed to. 
 Clause 58 ordered to stand part of the Bill.

Clause 59 - Compulsory purchase

Amendment made: No. 18, in page 28, line 19, leave out subsection (3) and insert- 
'(3) The requirement of consent under section [Part-unit:interests](2)(c) shall not apply to transfer to a compulsory purchaser.'.-[Mr. Wills.]
 Clause 59, as amended, ordered to stand part of the Bill. 
 Clauses 60 to 66 ordered to stand part of the Bill.

Schedule 5 - Commonhold: consequential amendments

Michael Wills: I beg to move amendment No. 21, in page 96, leave out lines 27 to 32.

Alan Hurst: With this it will be convenient to take Government new clause 4-Advice.

Michael Wills: An explanation of the history behind new clause 4 and amendment No. 21 might be in order, so I hope that hon. Members will bear with me.
 On Report in another place on 10 April 2001, the Government amended schedule 5, which now contains those amendments. Changes were made to section 94 of the Housing Act 1996, which, before those amendments, provided for the Secretary of State to give financial assistance for any person for the provision of legal advice about landlord and tenant law in relation to residential tenancies. 
 That led to the recreation on a new and permanent basis of the Leasehold Advisory Service, which began life in January 1994. It was funded partly by the Government and partly by the private sector. Its remit, which has been extended over the years, covers not only enfranchisement issues but aspects of the law on landlords and tenants as it relates to residential tenancies more generally. The officers of the organisation have been most helpful in the preparation of the Bill over a long period. We were told that the service was approached for advice about commonhold, despite its being at an early stage. 
 It was always our intention to provide independent advice on commonhold.

Gareth Thomas: Before we move away from part 1 of the Bill, which my hon. Friend will agree has been dealt with speedily, I have a point to which he could respond. If a sunset clause is not to be introduced in relation to leasehold for new developments, does he agree that the need for advice will be somewhat limited? He might want to reflect on the fact that there was considerable disquiet on Second Reading, not only about unanimity. I understand much about the Government's position and that they have a rooted objection to concessions to it, although I welcome the suggestion of a concession on cautions this morning.
 If commonhold is to be the standard form of tenure for new developments, many of my hon. Friends will feel the need for a sunset clause so that commonhold effectively displaces leasehold. I am sure that others will agree.

Michael Wills: I recognise the strength of feeling, which was made very evident on Second Reading and I heard the response to the remarks of my hon. Friend just now. I can only undertake at this stage to consider the matter and to return to it at a later stage if we can.
 We were going back into the history of the amendments and the new clause. The organisation, LEASE, has been very helpful. We were told that at a relatively early stage it was being asked for advice about commonhold. It was always our intention to provide independent advice on commonhold, and there seemed to us to be no advantage in reinventing the wheel when there was an organisation working as well as this one does. New subsection (1)(c) was therefore added to section 94. The new subsection enabled the Secretary of State to give financial assistance to any person in relation to the provision by that person of general advice about any aspect of the law of commonhold relating to residential matters. In the light of the interest that the organisation had already received from the public about commonhold, the ''person'' to whom such financial assistance was to be given was that body. The effect of the subsection is to extend its remit. 
 The whole of the Housing Act 1996 is devolved. That means that the National Assembly for Wales provides funding for advice in Wales. When we made the amendment in another place we had thought that because commonhold, as an addition to land law, is not a devolved matter, the Lord Chancellor, via the Secretary of State, would be able to make payments to the organisation in England and Wales. However, by using a devolved Act as a vehicle for the financial assistance, we have arrived at a situation in which the Secretary of State would not be able to make payments to anyone for the provision of commonhold advice in Wales. Without the amendment, funding of the commonhold advice in Wales will become a matter for the National Assembly for Wales. The problem with that is, as I have mentioned, that land law, as distinct from housing law, is not devolved and the Assembly would have no locus for involvement in the funding of general advice on commonhold law. Regrettably, under the present provisions, it is doubtful that any funding from anyone would be able to be provided for advice in Wales-at least, not without considerable additional administrative difficulty. That was certainly not our intention when attempting to provide reliable advice to the public on the law relating to commonhold. 
 To correct that anomaly, the Government have tabled the amendment to delete paragraph 9 of schedule 5 and, in its place, to make a provision in the body of the Bill that would give to the Lord Chancellor in respect of commonhold law the powers given to the Secretary of State by section 94 of the 1996 Act. On that basis, I commend the amendment.

Adrian Sanders: Is the Minister saying that that only applies to the situation in Wales? Does it not apply to advice across England and Wales? My experience of LEASE, or certainly the view that many leaseholders have relayed to me, is dissatisfaction at the fact that LEASE is overwhelmed with calls for advice and assistance. If it is going to extend its operation into advice on commonhold-I suspect that initially, at least, there will be a significant increase in the number of inquiries regarding the new concept-how satisfied is he that there will be advice services available to meet the demand? Will the new clause enable the Lord
 Chancellor to react quickly to meet the demand should it prove overwhelming to an existing organisation that is charged with the function?
 I have a separate question. I do not mean this as a criticism of LEASE, but does it naturally follow that that body would give the advice? Is there not some mechanism by which someone must tender for the contract to give the advice? There is a tendering culture in local government that does not always seem to apply to central Government. Might not bodies come forward and offer an advice service under a tendering process in England and Wales?

William Cash: The explanation for the distinctions between the different parts of the United Kingdom seems thin and strange. I am also concerned about the lack of guidance about what the financial assistance would involve and how far it would go. The terms of the new clause are pretty broad. It states:
''The Lord Chancellor may give financial assistance to a person in relation to the provision by that person of general advice about an aspect of the law of commonhold land, so far as relating to residential matters.''
 I do not know whether this is intended to be a social welfare operation, which, by analogy, could be applied to almost any Bill passed in the House. Some might argue that, on the same principle, financial assistance should be provided in any kind of Bill. 
 Many Bills are complex, as this one is. I have argued that the arrangements for unanimity will be counter-productive. I also raised the appalling discrepancy between the fines it was possible to levy in London, which amounted to £91 million, and the amount that was actually collected, which amounted to only £42 million. Should not the Lord Chancellor make some financial assistance available to ensure that the system for the enforcement of fines works more effectively? 
 I am taken aback by the prospect of huge sums being spent on making financial provisions on such a scale. Huge sums may inevitably be involved, but I cannot make an assessment of that, and I ask the Minister for further information. As a solicitor, I do not deal with such matters, because it is not the field of law in which I specialised, but I wonder whether the application of the principle should involve such huge sums, although the measure may be theoretically desirable. 
 I hasten to examine the Bill's opening passages to see whether it says that there are no financial implications. Such statements normally occur in a certain place in a Bill, but I do not see one. 
 I have made my point and would be grateful to hear what the Minister has to say. Will he give us an estimate of what will be involved and what starting arrangements will be required in the Lord Chancellor's Department to support the measure? What is the overall implication of these provisions?

Gareth Thomas: It is clear to me from dealing with constituents who have problems with tenure, especially with retirement leasehold property, which is a feature of the area that I represent, that there is a need for the
 advice and persistence provided by LEASE. I do not share the views of the hon. Member for Torbay. My impression of the professionalism and competency of LEASE is favourable. I introduced a private Member's Bill a few years ago to deal with many of the problems relating to the abuse of retired people in purpose-built retirement accommodation with which the Bill deals. LEASE gave me considerable amount of advice then, and my impression of the organisation was very favourable.

Adrian Sanders: I do not want the hon. Gentleman to think that I was questioning the professionalism of LEASE. I was simply saying that it has a large work load. Those who have sought advice have no qualms about its quality but are concerned about the amount of pressure that it is under now and has been since it was created.

Gareth Thomas: I am grateful for that clarification. LEASE's burden of work will increase if the Government introduce a sunset clause, which would make commonhold a standard form of tenure for new developments.
 As the only Welsh Member present, perhaps it is appropriate for me to remark that this Government introduced devolution in Scotland and Wales. We can be proud of that achievement, which is part of the Government's commitment to reforming the constitution. However, it is ironic that, because of the complexities of the devolution settlement, it was necessary to introduce the new clause in order to deal with the anomaly already referred to. 
 According to the Minister, whom I am not in a position to contradict, it would not have been possible to provide advice on commonhold issues in Wales unless funding for advice was channelled through the Lord Chancellor's Department. There is a need for advice on leasehold issues, which affect many people in retirement areas in Wales generally, and in Cardiff. On Second Reading, reference was made to the role of George Thomas, former Speaker of this House and former Secretary of State for Wales, who led a campaign, as a Member for a Cardiff constituency, where leasehold was a big concern, to reform the law. The amendment and the new clause are necessary and I welcome them.

Michael Wills: Let me begin by reassuring the hon. Member for Torbay that the power is general and that the assistance could be given to anyone whom the Lord Chancellor deemed appropriate.
 I hope that I am wrong, but the hon. Member for Stone seemed to consider that any matter of social welfare was to be resisted on principle. I hope that I misunderstood him. The Government think that considerations of social welfare are a desirable part of the Bill.

William Cash: As a member of my family actually invented the co-operative society, namely John Bright, I am unlikely to have made a remark of that kind without careful thought. I want to know whether giving people a fair opportunity to, for example, engage in the acquisition of rights and interests in land of the kinds that are described in the Bill, needs to supplemented by making large sums of money
 available for the purposes of providing advice, which can be obtained from other sources? I would like to know where this is leading, because legal aid is a highly contentious issue. I do not know what kind of sums might be involved. Will the Minister answer me directly as to whether an estimate has been made of how much money would be involved?

Michael Wills: I should have known better than to raise any matter relating to the hon. Gentleman's genealogy. I will confine my remarks from now on. The hon. Gentleman has overlooked the fact that the provision for the funding is already in the Bill. The amendment and the new clause are designed specifically to correct an anomaly of the kind that is inevitable in such a legislative process. They will restore the status quo, not create a new one. If the Committee does not accept them, the people of Wales will be deprived of advice.

John Taylor: The Minister is explaining the technicalities of dealing with the constitutional position. He mentioned the partial devolution of a function and said that two Ministers may need to be involved. I have no problem with that, but I join my hon. Friend the Member for Stone on one issue. I have never been described as an uncharitable person, but I may have to produce my most recent receipt for membership of the human race, because I am concerned about the principle involved in the clause. If I have difficulty with my motor car, I must face the consequences and either get an estimate from the garage for repairs or draw on the annual subscription that I pay to the Automobile Association for assistance. If I need assistance with the plumbing in my flat, I must get a plumber. I am concerned about the conceptual difference in the Bill, where paid-for assistance is available. What is special about the case in the Bill? Could we not do the same in the case of my motor car?

Michael Wills: Up until this point, we have had an extremely constructive and useful debate, but for the first time I feel that the proposed line of exploration has become utterly sterile and fruitless. I see no point in trying to establish general principles where the House has never done so before. Successive Governments have used taxpayers' money to provide various forms of advice, and they made judgments at the appropriate time. Under the present provision, the Lord Chancellor will decide in exactly the same way what financial support is appropriate in the circumstances to provide what level of advice.
 Hon. Members on both sides of the Committee want commonhold to take root, and we have designed the process to be as simple and straightforward as possible. Self-evidently, the need for advice should diminish over time. We do not know that for a fact, but that is the expectation. When the concept is in its very early stages and is unfamiliar, as the hon. Member for Stone said, we expect that the need for advice will be greater than it will be three, four or five years down the line. 
 We are exercising ourselves quite unnecessarily about something that is straightforward and is 
 simply designed to rectify an anomaly that has been created for the reasons that I gave. I see no reason why the people of Wales should be deprived of advice that the people of England can have.

John Taylor: I did not say that.

Michael Wills: I am not saying that the hon. Gentleman said anything of the sort. I am simply explaining what we are trying to achieve, and I hope that the Committee will see fit to accept the provisions.
 Amendment agreed to. 
 Schedule 5, as amended, agreed to. 
 Clause 67 ordered to stand part of the Bill.

Clause 68 - Index of defined expressions

Michael Wills: I beg to move amendment No. 19, in page 32, line 23, at end insert-
'Residential commonhold unit Section 17'.
 This is a minor amendment to clause 68, which contains the index of defined expressions. It will helpfully point readers of the Bill to the definition of the phrase ''residential commonhold unit''. Clause 17(5) provides that a unit is residential if the commonhold community statement requires it to be used only for residential or for residential and other incidental purposes. 
 Amendment agreed to. 
 Clause 68, as amended, ordered to stand part of the Bill.

New clause 2 - Part-unit: interests

'(1) It shall not be possible to create an interest in part only of a commonhold unit. 
 (2) But subsection (1) shall not prevent- 
 (a) the creation of a term of years absolute in part only of a residential commonhold unit where the term satisfies prescribed conditions, 
 (b) the creation of a term of years absolute in part only of a non-residential commonhold unit, or 
 (c) the transfer of the freehold estate in part only of a commonhold unit where the commonhold association consents in writing to the transfer. 
 (3) An instrument or agreement shall be of no effect to the extent that it purports to create an interest in contravention of subsection (1). 
 (4) Subsection (5) applies where- 
 (a) land becomes commonhold land or is added to a commonhold unit, and 
 (b) immediately before that event there is an interest in the land which could not be created after that event by reason of subsection (1). 
 (5) The interest shall be extinguished by virtue of this subsection to the extent that it could not be created by reason of subsection (1). 
 (6) Section 17(2) and (4) shall apply (with any necessary modifications) in relation to subsection (2)(a) and (b) above. 
 (7) Where part only of a unit is held under a lease, regulations may modify the application of a provision which- 
 (a) is made by or by virtue of this Part, and 
 (b) applies to a unit-holder or a tenant or both. 
 (8) Section 20(4) shall apply in relation to subsection (2)(c) above. 
 (9) Where the freehold interest in part only of a commonhold unit is transferred, the part transferred- 
 (a) becomes a new commonhold unit by virtue of this subsection, or 
 (b) in a case where the request for consent under subsection (2)(c) states that this paragraph is to apply, becomes part of a commonhold unit specified in the request. 
 (10) Regulations may make provision, or may require a commonhold(4)community statement to make provision, about- 
 (a) registration of units created by virtue of subsection (9); 
 (b) the adaptation of provision made by or by virtue of this Part or by or by virtue of a commonhold community statement to a case where units are created or modified by virtue of subsection (9).'.-[Mr. Wills.]
 Brought up, read the First and Second time, and added to the Bill.

New clause 3 - Part-unit: charging

'(1) It shall not be possible to create a charge over part only of an interest in a commonhold unit. 
 (2) An instrument or agreement shall be of no effect to the extent that it purports to create a charge in contravention of subsection (1). 
 (3) Subsection (4) applies where- 
 (a) land becomes commonhold land or is added to a commonhold unit, and 
 (b) immediately before that event there is a charge over the land which could not be created after that event by reason of subsection (1). 
 The charge shall be extinguished by virtue of this subsection to the extent that it could not be created by reason of subsection (1).'.-[Mr. Wills.]
 Brought up, read the First and Second time, and added to the Bill.

New clause 4 - Advice

'(1) The Lord Chancellor may give financial assistance to a person in relation to the provision by that person of general advice about an aspect of the law of commonhold land, so far as relating to residential matters. 
 (2) Financial assistance under this section may be given in such form and on such terms as the Lord Chancellor thinks appropriate. 
 (3) The terms may, in particular, require repayment in specified circumstances.'-[Mr. Wills.]
 Brought up, read the First and Second time, and added to the Bill. 
 Further consideration adjourned.-[Mr. Stringer.] 
 Adjourned accordingly at sixteen minutes past Six o'clock till Thursday 17 January at half-past Nine o'clock.